EXHIBIT 99.1

 

Investor Relations:

Brett Maas

Hayden IR

(646) 536-7331

brett@haydenir.com

 

PCM REPORTS RECORD FOURTH QUARTER AND FULL-YEAR 2016 RESULTS

 

Record Profitability: Q4 EPS of $0.37 and Adjusted EPS of $0.51, Exceeding Guidance

Record 2016 Full Year EPS of $1.40 and Adjusted EPS of $1.89

 

El Segundo, California — February 8, 2017 — PCM, Inc. (NASDAQ: PCMI), a leading technology solutions provider, today reported record financial results for the fourth quarter and full-year of 2016, exceeding guidance for both the quarter and full-year period.

 

Highlights (2016 compared to 2015):

 

Fourth Quarter: 

	●	Record net sales of $586.6 million, up 22% and exceeding the high end of our guidance of $565 to $580 million
	●	Record fourth quarter gross profit of $82.8 million, up 31%; gross profit margin increased to 14.1% from 13.1%
	●	Record fourth quarter operating profit of $9.2 million compared to operating loss of $22.1 million
	●	Record fourth quarter EBITDA of $13.1 million; adjusted EBITDA of $14.6 million, up 178%
	●	Diluted earning per share (EPS) of $0.37; adjusted EPS of $0.51, up 629% and exceeding the high end of our guidance of $0.40 to $0.48
	●	Strong cash flow from operations of $22.5 million

 

Full Year:

	●	Record net sales of $2.25 billion, up 35%, exceeding the high-end of our increased sales guidance of $2.23 to $2.24 billion
	●	Record gross profit of $318.8 million, up 42%; gross profit margin increased to 14.2% from 13.5%
	●	Record operating profit of $34.8 million compared to operating loss of $25.5 million
	●	Record EBITDA of $50.6 million; adjusted EBITDA of $54.8 million, up 168%
	●	Record diluted EPS of $1.40; adjusted EPS of $1.89, up 600% and at the high end of the guidance range
	●	Strong cash flow from operations of $95.6 million

 

Frank Khulusi, Chairman and CEO of PCM, Inc., commented, “Q4 capped an all-around stellar year for PCM with another stellar quarter, while we continued to invest in our future. We exceeded the high end of our guidance by delivering record Q4 results of $586.6 million in sales and $0.51 in adjusted EPS, up 22% and 629% respectively, while delivering strong cash flows. For the year we delivered record sales of $2.25 billion and record adjusted EPS of $1.89, up 35% and 600% respectively, while also delivering strong cash flows. PCM is a diversified technology powerhouse, offering a wide array of products and increasingly sophisticated solutions. Our sales teams continue to effectively cross sell these broad offerings into our large, growing and diversified customer base.”

 

Khulusi continued, “In 2017 we are making some big bets in areas which we believe will contribute healthily to our profitability in the long-term after an initial period of investment. In this regard, the recent acquisition of Stratiform, an innovative Gold Certified Microsoft Partner, expands our existing capabilities in Microsoft cloud technology, including Azure Cloud solutions, Office 365, and Enterprise Mobility Suite. This is a Canadian company, but we are very busy quickly extending its capabilities to the U.S. market, and further expanding its offerings.”

 

Jay Miley, President of PCM, Inc., said, “I was pleased to see traction in the expansion of our gross margins related to investments we have been making in both our Public Sector business and in our Advanced Solutions business. In each of these investment areas we saw very strong sales growth, while at the same time realizing significant gross margin improvement. In this regard, I was particularly pleased with the performance of our Federal and Networking teams.”

 

Miley continued, “We have also made great progress towards our investment goals in our new Rio Rancho sales office. As of today, we have 146 sales reps, nearly double what we last reported in October and ahead of our previously stated goal of 100 sales reps by the end of its first year of operations in August 2017. Despite the investments in Public Sector, Advanced Solutions, and our Rio Rancho sales office, we continued to deliver improvements in our SG&A as a percentage of sales.”

 

 

Commenting on PCM’s outlook, Khulusi stated, “It’s a great time to be at PCM, and we’re better positioned than ever for the future. Looking ahead, for the first quarter, we expect adjusted EPS in the range of $0.20 to $0.24 on net sales of $515 million to $530 million. For the year, we currently aim to deliver net sales of $2.34 billion to $2.38 billion and adjusted EPS of $2.00 to $2.15, with adjusted EPS ramping sequentially for each of the quarters of this year, as these incremental investments begin to bear fruit.”

 

Khulusi concluded, “These targets also assume a higher tax rate of approximately 40% and include the impact on 2017 net sales of transfers of an estimated amount of approximately $65 million related to customer contracts we purchased in the En Pointe acquisition, which we have been required by our customers to transfer to partners which qualify for certification as minority or women owned businesses under their supplier diversity policies. We have transferred these contracts to a partner in which we now hold a 49% passive equity interest and consequently these revenues will no longer be consolidated in our results in 2017. This change has an approximate 3% impact on the 2017 sales targets we stated above.”

 

Results of Operations

 

Net Sales

 

The following table presents our net sales by segment for the periods presented (dollars in thousands):

 

		Three Months Ended December 31,
		2016								2015
		Net Sales				Percentage of Total Net Sales				Net Sales				Percentage of Total Net Sales				Dollar Change				Percent Change
Commercial		$	457,545				78	%		$	396,442				82	%		$	61,103				15	%
Public Sector			92,366				16				68,760				14				23,606				34
Canada			36,753				6				16,987				4				19,766				116
Corporate & Other			(37	)			—				(4	)			—				(33	)			NM	(1)
Consolidated		$	586,627				100	%		$	482,185				100	%		$	104,442				22	%

 

(1) Not meaningful.

 

Consolidated net sales were $586.6 million in the three months ended December 31, 2016 compared to $482.2 million in the three months ended December 31, 2015, an increase of $104.4 million, or 22%. This increase was primarily due to the addition of sales from our fourth quarter 2015 acquisitions and strong organic growth predominantly in our federal business within the Public Sector segment. Consolidated sales of services were $39.6 million in the three months ended December 31, 2016 compared to $33.9 million in the three months ended December 31, 2015, an increase of $5.7 million, or 17%, and represented 7% of net sales in each of the three months ended December 31, 2016 and 2015, respectively.

 

Commercial net sales were $457.5 million in the three months ended December 31, 2016 compared to $396.4 million in the three months ended December 31, 2015, an increase of $61.1 million or 15%. This increase in Commercial net sales was primarily due to the addition of sales from our Tiger Direct acquisition, which we completed in early December 2015.

 

Public Sector net sales were $92.4 million in the three months ended December 31, 2016 compared to $68.8 million in the three months ended December 31, 2015, an increase of $23.6 million, or 34%. The increase in Public Sector net sales was primarily due to sales growth in our federal business which was primarily due to an increase in productivity resulting from investments we made in our federal business and an increase in our state and local government and educational institution (“SLED”) business primarily due to the addition of sales from our Tiger Direct acquisition.

 

Canada net sales were $36.8 million in the three months ended December 31, 2016 compared to $17.0 million in the three months ended December 31, 2015, an increase of $19.8 million, or 116%, representing increased sales from our Acrodex acquisition and the Canadian unit of our Tiger Direct acquisition in December 2015.

 

Gross Profit and Gross Profit Margin

 

Consolidated gross profit was $82.8 million in the three months ended December 31, 2016 compared to $63.1 million in the three months ended December 31, 2015, an increase of $19.7 million, or 31%. Consolidated gross profit margin increased to 14.1% in the three months ended December 31, 2016 from 13.1% in the same period last year. The increase in consolidated gross profit was primarily due to the increase in sales discussed above. The increase in consolidated gross profit margin was primarily due to an improved sales mix of advanced solutions and an increase in vendor consideration as a percent of net sales.

 

 

Selling, General & Administrative Expenses

 

Consolidated SG&A expenses were $73.6 million in the three months ended December 31, 2016 compared to $85.2 million in the three months ended December 31, 2015, a decrease of $11.6 million, or 14%. Consolidated SG&A expenses as a percentage of net sales decreased to 12.6% in the three months ended December 31, 2016 from 17.7% in the same period last year. The decrease in consolidated SG&A expenses was primarily due to a $22.1 million non-cash charge in the three months ended December 31, 2015 related to our decision to pursue En Pointe’s SAP solution over the AX ERP solution, partially offset by SG&A expenses relating to our 2015 acquisitions, including a $7.6 million increase in personnel costs primarily related to the acquisitions and investments we have made in advanced technologies and software and a $1.0 million increase in amortization expense related to purchased intangibles.

 

Operating Profit (Loss)

 

The following table presents our operating profit (loss) and operating profit margin by segment for the periods presented (dollars in thousands):

 

		Three Months Ended December 31,																								Change in
		2016								2015								Change in								Operating
		Operating Profit				Operating Profit				Operating Profit				Operating Profit				Operating Profit (Loss)								Profit Margin
		(Loss)				Margin(1)				(Loss)				Margin(1)				$				%				%
Commercial		$	21,726				4.7	%		$	17,599				4.4	%		$	4,127				23	%			0.3	%
Public Sector			3,662				4.0				868				1.3				2,794				322				2.7
Canada			711				1.9				591				3.5				120				20				(1.6	)
Corporate & Other			(16,892	)			(2.9	)(1)			(41,139	)			(8.5	)(1)			24,247				(59	)			5.6
Consolidated		$	9,207				1.6	%		$	(22,081	)			(4.6	)%		$	31,288				NM				6.2	%

 

(1)	Operating profit margin for Corporate & Other is computed based on consolidated net sales. Operating profit margin for each of the other segments is computed based on the respective segment’s net sales.

 

Consolidated operating profit was $9.2 million in the three months ended December 31, 2016 compared to operating loss of $22.1 million in the three months ended December 31, 2015, an increase of $31.3 million.

 

Commercial operating profit was $21.7 million in the three months ended December 31, 2016 compared to $17.6 million in the three months ended December 31, 2015, an increase of $4.1 million, or 23%. The increase in Commercial operating profit was primarily due to a $12.6 million increase in Commercial gross profit, partially offset by an increase in personnel costs related to the Tiger Direct acquisition, investments in advanced technologies and software specialists and variable compensation on increased gross profit.

 

Public Sector operating profit was $3.7 million in the three months ended December 31, 2016 compared to $0.9 million in the three months ended December 31, 2015, an increase of $2.8 million, or 322%. The increase in Public Sector operating profit was due to the increase in Public Sector gross profit, partially offset by an increase of $1.5 million of various SG&A expense items including increases in variable compensation on increased gross profit, a bad debt charge, a legal settlement and amortization of purchased intangibles.

 

Canada operating profit was $0.7 million in the three months ended December 31, 2016 compared to $0.6 million in the three months ended December 31, 2015, an increase of $0.1 million, or 20%., representing the operating profit from our Acrodex acquisition and the Canadian unit of our Tiger Direct acquisition in December 2015.

 

Corporate & Other operating expenses include corporate related expenses such as legal, accounting, information technology, product management and certain other administrative costs that are not otherwise included in our reportable operating segments. Corporate & Other operating expenses were $16.9 million in the three months ended December 31, 2016 compared to $41.1 million in the three months ended December 31, 2015, a decrease of $24.2 million, or 59%. The decrease in our Corporate & Other operating expenses was primarily due to a $22.1 million non-cash charge related to our previously announced decision to pursue En Pointe’s SAP solution over the AX ERP solution and a $1.1 million decrease in personnel costs.

 

Income (Loss) From Continuing Operations

 

Income from continuing operations (after tax) was $4.7 million, or $0.37 per diluted share, in the three months ended December 31, 2016 compared to loss from continuing operation of $14.1 million, or $(1.21) per diluted share, in the same period last year.

 

 

Adjusted EBITDA and Adjusted EPS

 

Adjusted EBITDA (as defined below) for the three months ended December 31, 2016 was $14.6 million compared to $5.2 million for the three months ended December 31, 2015. Non-GAAP EPS (Adjusted EPS) from continuing operations was $0.51 for the three months ended December 31, 2016 compared to $0.07 in the three months ended December 31, 2015. The increase in adjusted EBITDA and adjusted EPS was primarily driven by the increase in operating profit discussed above.

 

Consolidated Balance Sheet and Cash Flow

 

We generated cash flow from operations for year ended December 31, 2016 of $95.6 million, compared to cash used in operations of $52.4 million in the year ended December 31, 2015. Accounts receivable at December 31, 2016 was $358.9 million, an increase of $17.9 million from December 31, 2015. Inventory at December 31, 2016 was $80.9 million, an increase of $25.5 million from December 31, 2015. Accounts payable at December 31, 2016 was $276.5 million, an increase of $75.0 million from December 31, 2015. Cash flow used in investing activities during the year ended December 31, 2016 totaled $10.9 million compared to $66.2 million during the year ended December 31, 2015. Investing activities for the year ended December 31, 2016 were primarily related to $8.7 million of capital expenditures, $1.5 million related to the acquisition of Stratiform in December 2016 and $0.5 million of incremental acquisition-related investments. Investing activities for the year ended December 31, 2015 was primarily related to the acquisition of En Pointe for $17.3 million, the acquisition of certain assets of Systemax for $14.0 million, the acquisition of Acrodex for $13.6 million, net of cash acquired, the purchase of real properties in Lewis Center, Ohio for $6.0 million and in Irvine, California for $5.8 million, as well as expenditures relating to investments in our IT infrastructure and new ERP systems. Total notes payable, including the $4.6 million of note payable related to asset held for sale in connection with our Irvine property, decreased by $4.6 million to $34.5 million at December 31, 2016 compared to December 31, 2015. Outstanding borrowings under our line of credit decreased by $55.0 million to $107.4 million at December 31, 2016 compared to December 31, 2015.

 

Account Executive Headcount

 

The following table presents our average account executive headcount, by segment, for our continuing operations for the periods presented:

 

Average Account Executive		Three Months Ended December 31,
Headcount By Segment:		2016				2015
Commercial			863				637
Public Sector			179				137
Canada			81				40
Total			1,123				814

 

Product Sales Mix

 

The following table sets forth our net billed sales by major categories as a percentage of total net billed sales for the periods presented, determined based upon our internal product code classifications.

 

		Three Months Ended December 31,								Y/Y Sales
Product Sales Mix:		2016				2015				Growth
Software(1)			25	%			27	%			13	%
Notebooks and Tablets			20				19				29
Networking			7				7				24
Delivered services			7				7				17
Desktops			7				7				17
Manufacturer service and warranties(1)			6				6				19
Accessories			5				3				74
Display			4				4				28
Storage			4				5				12
Printers			3				2				99
Servers			2				3				(25	)
Other(2)			10				10				4
Total			100	%			100	%

 

(1)	Software, including software licenses, maintenance and enterprise agreements, and manufacturer service and warranties are shown, for purposes of this table, on a gross sales billed to customers basis, net of returns and do not reflect the net down impact related to revenue recognition for sales of such products.
(2)	Other includes power, input devices, supplies, consumer electronics, memory, iPod/MP3 and miscellaneous other items.

 

 

Non-GAAP Measure

 

We are presenting earnings before interest, taxes, depreciation and amortization expenses (EBITDA), adjusted EBITDA and non-GAAP EPS (adjusted EPS), which are financial measures that are not determined in accordance with accounting principles generally accepted in the United States of America, or GAAP. Adjusted EBITDA and adjusted EPS remove the effect of severance and restructuring related expenses related to our cost reduction initiatives and stock-based compensation, as well as uncommon, non-recurring or special items. Adjusted EPS also removes the effect of amortization of intangibles acquired in acquisitions. Depreciation and amortization expenses primarily represent an allocation to current expense of the cost of historical capital expenditures and for acquired intangible assets resulting from prior business acquisitions. EBITDA, adjusted EBITDA and adjusted EPS should be used in conjunction with other GAAP financial measures and are not presented as an alternative measure of operating results, as determined in accordance with GAAP. We believe that these non-GAAP financial measures allow a more meaningful comparison of our operating performance trends to both management and investors that is more indicative of our consolidated operating results across reporting periods. We believe that adjusted EBITDA and adjusted EPS provide a better understanding of our company’s operating performance and cash flows. A reconciliation of the non-GAAP consolidated financial measures is included in a table below.

 

Conference Call

 

Management will hold a conference call, which will be webcast, on February 8, 2017 at 4:30 p.m. Eastern Time (1:30 p.m. Pacific Time) to discuss its fourth quarter results. To listen to PCM management’s discussion of its fourth quarter results live, access http://investor.pcm.com/events.cfm.

 

The archived webcast can be accessed at http://investor.pcm.com under “Events & Presentations.” A replay of the conference call by phone will be available from 7:30 p.m. ET on February 8, 2017 until February 15, 2017 and can be accessed by calling (855) 859-2056 (International (404) 537-3406) and inputting code 61851522.

 

About PCM, Inc.

 

PCM, Inc., through its wholly-owned subsidiaries, is a leading technology solutions provider to small and medium sized businesses, mid-market and enterprise customers, government and educational institutions and individual consumers across the United States and Canada. We generated net sales of $2.25 billion in the twelve months ended December 31, 2016. For more information, please visit investor.pcm.com or call (310) 354-5600.

 

Forward-looking Statements

 

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding our expectations, hopes or intentions regarding the future, including but not limited to, statements related to our strategic positioning; our positioning for future growth; our growing customer base; our acquisition of Stratiform and extending its capabilities to the U.S. market and expanding its offerings; expectation of 2016 financial performance, opportunities, expectations or intentions for growth in top or bottom line operating results; expectations of earnings per share and statements regarding our investments paying off or contributing to our profitability. Forward-looking statements involve certain risks and uncertainties, and actual results may differ materially from those discussed in any such statement. Factors that could cause our actual results to differ materially include without limitation risks and uncertainties related to the following: our ability to attract and retain key employees; our ability to receive expected returns on changes in our sales and services organizations or strategic investments, including without limit, investments in public sector, advanced technology solutions and services and our call centers; risks associated with our ability to integrate our acquisitions; availability of key vendor incentives and other vendor assistance; our IT infrastructure; the relationship between the number of our account executives and productivity; decreased sales related to any of our segments, including but not limited to, potential decreases in sales resulting from the loss of or a reduction in purchases from significant customers; possible discontinuance of IT licenses used to operate our business which are provided by vendors; increased competition, including, but not limited to, increased competition from direct sales by some of our largest vendors and increased pricing pressures which affect our pricing strategy in any given period; the effect of our pricing strategy on our operating results; potential decreases in sales related to changes in our vendors products; the potential lack of availability of government funding applicable to our Public Sector business; the impact of seasonality on our sales; availability of products from third party suppliers at reasonable prices; business and other conditions in Canada and the Asia Pacific region and the related effects on our newly acquired Canadian and our Asia-Pacific operations, including without limitation our executive management’s lack of experience operating in the Canadian market; increased expenses, including, but not limited to, interest expense, foreign currency transaction gains/losses and other expenses which may increase as a result of future inflationary pressures; our advertising, marketing and promotional efforts may be costly and may not achieve desired results; shifts in market demand or price erosion of owned inventory; other risks related to foreign currency fluctuations; warranties and indemnities we may be required to provide to third parties through our commercial contracts; data security; litigation by or against us; and availability of financing, including availability under our existing credit lines. Additional factors that could cause our actual results to differ are discussed under the heading “Risk Factors” in Item 1A, Part II of our Form 10-Q for the period ended September 30, 2016, on file with the Securities and Exchange Commission, and in our other reports filed from time to time with the SEC. All forward-looking statements in this document are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statements.

 

-Financial Tables Follow-

 

 

PCM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

 

		Three Months Ended December 31,								Year Ended December 31,
		2016				2015				2016				2015
Net sales		$	586,627			$	482,185			$	2,250,587			$	1,661,948
Cost of goods sold			503,787				419,072				1,931,786				1,437,621
Gross profit			82,840				63,113				318,801				224,327
Selling, general and administrative expenses			73,633				85,194				284,010				249,809
Operating profit (loss)			9,207				(22,081	)			34,791				(25,482	)
Interest expense, net			1,550				1,199				6,083				3,860
Income (loss) from continuing operations before income taxes			7,657				(23,280	)			28,708				(29,342	)
Income tax expense (benefit)			2,947				(9,164	)			11,115				(11,394	)
Income (loss) from continuing operations			4,710				(14,116	)			17,593				(17,948	)
Loss from discontinued operations, net of taxes			—				(51	)			—				(310	)
Net income (loss)		$	4,710			$	(14,167	)		$	17,593			$	(18,258	)
Basic and Diluted Earnings (Loss) Per Common Share
Basic EPS:
Income (loss) from continuing operations		$	0.40			$	(1.21	)		$	1.49			$	(1.49	)
Loss from discontinued operations, net of taxes			—				(0.00	)			—				(0.03	)
Net income (loss)		$	0.40			$	(1.21	)		$	1.49			$	(1.52	)
Diluted EPS:
Income (loss) from continuing operations		$	0.37			$	(1.21	)		$	1.40			$	(1.49	)
Loss from discontinued operations, net of taxes			—				(0.00	)			—				(0.03	)
Net income (loss)		$	0.37			$	(1.21	)		$	1.40			$	(1.52	)
Weighted average number of common shares outstanding:
Basic			11,867				11,756				11,847				12,049
Diluted			12,758				11,756				12,528				12,049

 

 

PCM, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(unaudited, in thousands)

 

		Three Months Ended December 31,								Year Ended December 31,
		2016				2015				2016				2015
EBITDA(a):
Consolidated operating profit (loss)		$	9,207			$	(22,081	)		$	34,791			$	(25,482	)
Add: Consolidated depreciation expense			2,422				2,712				9,944				10,873
Consolidated amortization expense			1,440				419				5,840				1,344
EBITDA		$	13,069			$	(18,950	)		$	50,575			$	(13,265	)
EBITDA Adjustments:
Stock-based compensation		$	504			$	369			$	1,961			$	1,589
M&A related fees(b)			343				873				1,250				2,083
Severance & restructuring related costs(c)			615				116				2,529				3,845
Foreign exchange (gain) loss			22				741				(240	)			726
Write-off of ERP and CRM(d)			—				22,094				37				25,427
Legal settlement gain(e)			—				—				(1,333	)			—
Total EBITDA adjustments		$	1,484			$	24,193			$	4,204			$	33,670
Adjusted EBITDA
EBITDA		$	13,069			$	(18,950	)		$	50,575			$	(13,265	)
Add: EBITDA Adjustments			1,484				24,193				4,204				33,670
Adjusted EBITDA		$	14,553			$	5,243			$	54,779			$	20,405
Consolidated income (loss) from continuing operations:
Consolidated income (loss) from continuing operations before income taxes		$	7,657			$	(23,280	)		$	28,708			$	(29,342	)
Less: Income tax expense (benefit)			2,947				(9,164	)			11,115				(11,394	)
Consolidated income (loss) from continuing operations		$	4,710			$	(14,116	)		$	17,593			$	(17,948	)
Consolidated income (loss) from continuing operations before income taxes		$	7,657			$	(23,280	)		$	28,708			$	(29,342	)
Add: EBITDA Adjustments			1,484				24,193				4,204				33,670
Amortization of purchased intangibles(f)			1,436				416				5,825				1,323
Adjusted income from continuing operations before income taxes			10,577				1,329				38,737				5,651
Less: Adjusted income tax expense			4,071				523				14,998				2,194
Non-GAAP consolidated income from continuing operations		$	6,506			$	806			$	23,739			$	3,457
Diluted earnings per share:
GAAP diluted EPS
Consolidated income (loss) from continuing operations		$	0.37			$	(1.21	)		$	1.40			$	(1.49	)
Non-GAAP diluted EPS
Non-GAAP consolidated income from continuing operations		$	0.51			$	0.07			$	1.89			$	0.27
GAAP diluted weighted average number of common shares outstanding			12,758				11,756				12,528				12,049
Non-GAAP diluted weighted average number of common shares outstanding			12,758				12,243	(g)			12,528				12,601	(g)

 

(a)	EBITDA — earnings from continuing operations before interest, taxes, depreciation and amortization.
(b)	Relates to costs incurred relating to our acquisitions.
(c)	Includes employee severance related costs related to our cost reduction initiatives, lease vacancy costs and other restructuring related costs.
(d)	Relates to the write-off of internally developed software work in process related to our upcoming ERP and CRM systems, in favor of a ERP and CRM systems already configured and in production at En Pointe.
(e)	Relates to gain resulting from a class action settlement related to the DRAM Indirect Antitrust Litigation.
(f)	Includes amortization expense for acquisition-related intangible assets, which include trademarks, trade names, non-compete agreements and customer relationships.
(g)	Includes approximately 487,000 and 553,000 dilutive shares for the three months and year ended December 31, 2015, respectively, for computation of non-GAAP diluted EPS.

   

 

PCM, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except per share amounts and share data)

 

		December 31,
		2016				2015
ASSETS
Current assets:
Cash and cash equivalents		$	7,172			$	11,176
Accounts receivable, net of allowances of $832 and $558			358,949				341,018
Inventories			80,872				55,386
Prepaid expenses and other current assets			16,250				17,880
Deferred income taxes			3,585				4,425
Asset held for sale			5,812				5,812
Total current assets			472,640				435,697
Property and equipment, net			56,352				56,774
Goodwill			83,388				80,552
Intangible assets, net			15,074				20,807
Deferred income taxes			508				939
Other assets			4,994				5,404
Total assets		$	632,956			$	600,173
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	276,524			$	201,524
Accrued expenses and other current liabilities			63,930				51,580
Deferred revenue			10,960				11,455
Line of credit			107,396				162,439
Notes payable — current			11,168				12,912
Note payable related to asset held for sale			4,601				4,799
Current liabilities of discontinued operations			79				153
Total current liabilities			474,658				444,862
Notes payable			18,750				21,454
Other long-term liabilities			7,039				20,289
Deferred income taxes			4,038				4,053
Total liabilities			504,485				490,658
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding			—				—
Common stock, $0.001 par value; 30,000,000 shares authorized; 16,465,567 and 16,007,613 shares issued; 11,967,202 and 11,914,946 shares outstanding			16				16
Additional paid-in capital			127,777				122,932
Treasury stock, at cost: 4,498,365 and 4,092,667 shares			(26,934	)			(23,326	)
Accumulated other comprehensive loss			(639	)			(765	)
Retained earnings			28,251				10,658
Total stockholders’ equity			128,471				109,515
Total liabilities and stockholders’ equity		$	632,956			$	600,173

  

 

PCM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

		Year Ended December 31,
		2016				2015
Cash Flows From Operating Activities
Net income (loss)		$	17,593			$	(18,258	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			15,784				12,217
Write-off of software work in process			37				25,427
Provision for deferred income taxes			1,248				(9,775	)
Excess tax benefit related to stock option exercises			(895	)			(231	)
Non-cash stock-based compensation			1,961				1,589
Change in operating assets and liabilities:
Accounts receivable			(17,421	)			(126,981	)
Inventories			(25,557	)			1,663
Prepaid expenses and other current assets			1,770				(629	)
Other assets			1,020				837
Accounts payable			87,702				54,314
Accrued expenses and other current liabilities			12,948				6,317
Deferred revenue			(572	)			1,074
Total adjustments			78,025				(34,178	)
Net cash provided by (used in) operating activities			95,618				(52,436	)
Cash Flows From Investing Activities
Acquisition of assets of En Pointe			—				(17,295	)
Acquisition of Acrodex, net of cash acquired			(93	)			(13,566	)
Acquisition of assets of Systemax			(400	)			(14,000	)
Acquisition of Stratiform			(1,584	)			—
Purchases of property and equipment			(8,705	)			(21,380	)
Net cash used in investing activities			(10,782	)			(66,241	)
Cash Flows From Financing Activities
Net (payments) borrowings under line of credit			(55,043	)			109,644
Borrowing under note payable			526				17,695
Payments under notes payable			(5,173	)			(4,686	)
Change in book overdraft			(13,131	)			16,387
Payments of earn-out liability			(13,058	)			(8,938	)
Payments of obligations under capital lease			(2,425	)			(2,394	)
Proceeds from stock issued under stock option plans			2,541				907
Payment for deferred financing costs			(653	)			(760	)
Common shares repurchased and held in treasury			(3,608	)			(5,854	)
Excess tax benefit related to stock option exercises			895				231
Net cash (used in) provided by financing activities			(89,129	)			122,232
Effect of foreign currency on cash flow			289				(1,271	)
Net change in cash and cash equivalents			(4,004	)			2,284
Cash and cash equivalents at beginning of the period			11,176				8,892
Cash and cash equivalents at end of the period		$	7,172			$	11,176
Supplemental Cash Flow Information
Interest paid		$	5,373			$	3,619
Income taxes paid (refund), net			7,332				(4,960	)
Supplemental Non-Cash Investing and Financing Activities
Accrued earn-out liability related to En Pointe acquisition		$	—			$	38,625
Accrued earn-out liability related to Stratiform acquisition			326				—
Financed purchases of property and equipment			777				895